Indonesia Outlook. Market growth below potential

Indonesia Automotive Toyota-i_Concept-2017

Indonesia Automotive industry outlook is still not positive as could be. The market size is still little compared with one of most populated country worldwide. Toyota is investing while Ford ceased sales operations.

Indonesia is the largest market within the ASEAN region with over 1 million vehicles sold and is the second vehicles producer in the region, with 1 million vehicles produced in the 2016.

The medium term positive path has been broken by economic difficulties in the last three years, after having posted in the 2013 the record of 1.229.000 sales. However, during the 2016 the market started recovering and outlook is almost positive.

The market is dominated by Japanese brands and the recent introduction of incentives for compact low emission vehicles has further limited the sales of luxury brands and not Japanese brands (like Ford and Chevrolet) which have left share in the last two years.

In January 2016, Ford announced that it planned to cease sales operations in Indonesia by the end of the year – a course of action reminiscent of General Motors’ 2015 decision to shut down manufacturing facilities in the country.

Indonesia’s automotive sector stands as a case in point for the widely accepted claim that the country is best suited to businesses and investors with a long-term mindset.

Bureaucratic and infrastructural inefficiencies will continue to present obstacles and prevent the emergence of a clear path to success, but there are rewards for those willing to wait out intermittent stalls. Clearly, this is the understanding of automotive brands that are firmly entrenched in the country and have long dominated market share.

As first reported by the Ministry of Industry in mid-February 2016, Toyota intends to invest 5.4 trillion IDR in Indonesia this year in support of its plan to further local production capabilities. This follows on from data from the Investment Coordinating Board (BKPM) showing a 13% y-o-y rise in automotive sector investment to 21.6 trillion IDR in 2015, propelled by the construction of new factories by Mitsubishi and Isuzu.

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